The Customer Experience

Management Concept

Categories of Customer Interaction

Such a strategy requires more than simply satisfying customers, or even delighting them. A well-designed Customer Experience Management initiative should identify precisely the types of customer behaviors the company wishes to influence, and have a plan for providing experiences that influence those behaviors. It should also recognize how customer needs and expectations change at different points in the lifecycle of the relationship and account for those changes.

The mistake many companies make is to launch expensive, high-profile service initiatives with no clear idea of what they hope to accomplish and no calculation of return on investment. They create customer loyalty programs that make it more attractive for customers to stay (or more expensive for them to leave), but they seldom seek to influence other behaviors in a systematic manner. They may also raise the banner of "customer delight", believing that repeatedly delighted customers will become advocates or "apostles" for the company. But such a strategy is a blunt instrument, requiring a great deal of energy to obtain limited or uncertain results. Customer Experience Management seeks a greater level of precision. It requires companies to define the customer behaviors they wish to influence, and to align their marketing message, performance standards, training content, employee incentives and measurement systems to encourage those behaviors.

It is impossible, of course, to plan every customer experience or to ensure that every experience occurs exactly as intended. However, companies can identify the types of experiences that impart the right kind of information to customers at the right times. It is useful to group these experiences into three categories of company/customer interaction: Stabilizing, Critical, and Planned.

Stabilizing: Stabilizing interactions promote customer retention, particularly in the early stages of the relationship.

Analyses of turnover patterns typically show that new customers account for the lion's share of defections. As customers become more familiar with a company's offerings and capabilities they will adjust their expectations accordingly, but in the early stages of the relationship customers are more likely to experience disappointment, and thus more likely to defect. Turnover by new customers is particularly hard on profits because many defections occur prior to break-even, resulting in a net loss for the company. Thus, experiences that stabilize the customer relationship early on ensure that a higher proportion of customers will reach positive profitability.

The keys to an effective stabilizing strategy are education, competence and consistency.

Education influences expectations, helping customers develop a realistic range of tolerance early in the relationship. It goes beyond simply informing customers about the products and services offered by the company. It systematically imparts information that tells new customers how to use the company's services more effectively and efficiently, how to obtain assistance, how to complain, and what to expect as the relationship progresses. In addition to influencing expectations, systematic education leads to greater efficiency in the way customers interact with the company, thus driving down the cost of customer service and support.

While educational efforts influence the expectations of new customers, competence and consistency validate those expectations. Every company strives to offer competent and consistent service, of course, but that objective is becoming increasingly difficult to accomplish. Companies have been reducing staff and outsourcing key services since the 1980's, often at the expense of front-line service quality. In many industries companies have also had to contend with high employee turnover rates, leading to productivity and consistency problems that are increasingly obvious to frustrated customers. In addition, the complex, multi-channel service environment that has emerged in recent years has challenged companies to present a unified identity to the market and to provide a consistent level of service across all channels and touch points.

Customers expect companies to do what they promise, and to do it every time. Any experience that contradicts that expectation weakens the relationship and increases the probability that a customer will defect. In order to demonstrate competence and consistency, companies must be able to assess their performance across channels, across locations and across time. They must be able to identify inconsistencies and deficiencies in performance at every point of interaction with customers, whether the interaction originates with company employees, out-sourced service providers, franchisees or affiliate organizations. Furthermore, these data must be integrated in such a way that they will realistically reflect the complete customer experience, not only within individual channels but also between channels.

Critical: Critical interactions are service encounters that lead to memorable customer experiences. While most service is routine, from time to time a situation arises that is out of the ordinary: a complaint, a question, a special request, a chance for an employee to go the extra mile. The outcomes of these critical incidents can be either positive or negative, depending upon the way the company responds to them; however, they are seldom neutral. The longer a customer remains with a company, the greater the likelihood that one or more critical interactions will have occurred.

Because they are memorable and unusual, critical interactions tend to have a powerful effect on the customer relationship. Positive outcomes lead to "customer delight" and word-of-mouth endorsements, while negative outcomes lead to customer defections, diminished share of wallet and unfavorable word-of-mouth.

The key to an effective critical interaction strategy is opportunity. Many companies have begun to treat all customer interactions as critical, leading to initiatives in which they attempt to "exceed customer expectations every time." While this may sound like a worthy objective, it is, in fact, logically unattainable. If expectations are consistently exceeded, customers will simply raise their expectations. The exceptional thus becomes routine, forcing companies to continually raise the bar, often at great expense.

The fact is, customers do not want to be delighted all the time. It is an exhausting exercise, both for the customers and the employees. Every consumer receives service dozens of times a week from a wide range of companies, and most of those interactions are, and should be, routine. However, when an exceptional circumstance does occur, companies should recognize the opportunity and be prepared to take advantage of it.

An effective Customer Experience Management strategy includes systems for recording critical interactions, analyzing trends and patterns, and feeding that information back to the organization. Employees can then be trained to recognize critical opportunities, and empowered to respond to them in such a way that they will lead to positive outcomes and desired customer behaviors.

Planned: Planned interactions are intended to increase customer profitability through up-selling and cross-selling. These interactions are frequently triggered by changes in the customers' purchasing patterns, account usage, financial situation, family profile, etc. CRM analytics are becoming quite effective at recognizing such opportunities and prompting action from service and sales personnel. Customer Experience Management complements CRM by recording and analyzing the quality of execution by the company and the resulting effect on customer relationships.

The key to an effective strategy for planned interactions is appropriateness. Triggered requests for increased spending must be made in the context of the customers' needs and permission; otherwise the requests will come off as clumsy and annoying. By aligning information about executional quality (cause) and customer impressions (effect), CEM helps companies build a more effective and appropriate approach to planned interactions.